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An entity has $600,000 of total assets including current assets of $300,000. The following information has also been produced about the entity: The two owners
An entity has $600,000 of total assets including current assets of $300,000. The following information has also been produced about the entity: The two owners have contributed $200,000 each. The entity has always distributed all the profits. Total Liabilities are $200,000. The entity owes $150,000 to trade creditors/accounts payable. The remainder of the entity's loan financing is via a mortgage loan. The entity made a Net Profit after tax this year of $60,000. The profit figure includes $20,000 of interest expense associated with the loan. Required: In the boxes provided state whether each statement is true or false. Please also show workings to support your answer in the box provided. a. The entity's current ratio is 2:1. (1 mark) b. The entity's net assets are $400,000. (1 mark) The uses more equity financing than debt financing. (1 mark) d. The entity's Return on Assets is 10%. (1 marks) c
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